Drugs have always fascinated me - the legitimate kind of course. What can I say I was in high school and college during the 60's? The reason drugs hold my interest is I'm amazed how by adding some chemicals to your body, the body either begins rejecting the disease that has taken over or turns off its bad habits and makes you well. No surgery, just the addition of some chemicals and poof -- wellness.
One of the best drug companies is Merck (MRK). It's one of the largest companies in the world and a Dow 30 component. They make drugs for both humans and animals. What a market - curing our families, pets and livestock. I can't read a magazine or turn on my TV without being exposed to one of their ads. See what you recognize from this list: Singular -- asthma and allergies, Fosamax -- osteoporosis, Procepia -- male pattern baldness or Gardacil -- cervical cancer. They do a great job of not only discovering new drugs -- with new patents of course -- but also manufacturing, marketing and distributing them. All full service drug powerhouse.
Analysts love this stock too with 10 buy, 5 hold and no sell recommendations. They look for 67.0% growth in sales next year with a 6.1 EPS growth and additional positive EPS growth for the next 5 years. The smart boys of Wall Street -- the short sellers -- made a big 180 and cut their short interest from a high of 206 million in the fall to only 23 million by year end.
Barchart's 13 technical indicators all signal buy; its not often a Dow 30 get a 100% buy signal. Since the stock's low on 3/9/09 the stock has gained 49.29% and since mid July has never seen a day below its 100 day moving average.
On other sites Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment rating. The Motley Fool CAPS members think the stock will out perform the market by a vote of 2338 to 184 with the All Stars in agreement voting 705 to 38. Even the Wall Street columnists Fool follows have had 27 to 1 favorable endorsements.
Recommendation: All portfolios need some foundation stocks and what better one then Merck (MRK). They find, manufacturer, market and distribute drugs for humans, pets and livestock. Their products a some of the most recognizable and they keep adding to the pipeline all the time. Growth expected in both sales and earnings for the next 5 years and a positive following with short interest falling like a rock. The technicals are recently very positive. Purchase around 40 and since this is a long term holding use the 100 day moving average of 36 as your stop loss. Just keep sliding that stop loss up on a monthly basis to preserve your long term profits.
Disclosure: No holding in Merck at the time of publication
Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com
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